UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549-1004
__________
FORM 10-Q
(Mark One)
/X/[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31,SEPTEMBER 30, 2003
OR
/ /[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 0-4065-1
__________
LANCASTER COLONY CORPORATION
(Exact name of registrant as specified in its charter)
OHIO 13-1955943
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
37 WEST BROAD STREET 43215
COLUMBUS, OHIO (Zip Code)
(Address of principal executive offices)
614-224-7141
(Registrant's telephone number, including area code)
NONE
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X[x] No --- ---[ ]
Indicate by check mark whether the registrant is an accelerated filer
(as defined inby Rule 12b-2 of the Exchange Act). Yes X[x] No --- ---[ ]
As of MarchOctober 31, 2003, there were approximately 35,844,00035,760,000 shares of
Common Stock, no par value per share, outstanding.
LANCASTER COLONY CORPORATION AND SUBSIDIARIES
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements:
Condensed
Consolidated Balance Sheets - March 31,September 30, 2003 and June 30, 2002
Condensed2003
Consolidated Statements of Income - Three and Nine Months Ended
March 31,September 30, 2003 and 2002
Condensed
Consolidated Statements of Cash Flows - NineThree Months Ended
March 31,September 30, 2003 and 2002
Notes to Condensed Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of the Results of Operations and
Financial Condition
Item 4. Controls and Procedures
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
Signatures
Certifications
Index to ExhibitsSIGNATURES
INDEX TO EXHIBITS
2
PART I - FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
LANCASTER COLONY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31SEPTEMBER 30 JUNE 30
(DOLLARS(AMOUNTS IN THOUSANDS)THOUSANDS, EXCEPT SHARE DATA) 2003 2002
--------------------2003
--------------------------------------- ------------- ---------------------
(UNAUDITED)
ASSETS
ASSETS
CURRENT ASSETS:
Cash and equivalents................................................equivalents................................................. $ 131,357145,633 $ 83,378142,847
Receivables - net(net of allowance for doubtful accounts................ 101,520 109,350accounts,
September - $2,147 and June - $1,952).............................. 105,562 88,583
Inventories:
Raw materials and supplies........................................ 45,944 43,670supplies......................................... 46,952 42,957
Finished goods and work in process................................ 107,192 104,581process................................. 120,709 116,455
----------- ---------------------
Total inventories............................................... 153,136 148,251
Prepaid expensesinventories................................................ 167,661 159,412
Deferred income taxes and other current assets........................... 27,022 25,121assets....................... 25,718 23,543
----------- ---------------------
Total current assets............................................ 413,035 366,100assets............................................. 444,574 414,385
PROPERTY, PLANT AND EQUIPMENT - at cost................................ 455,941 453,671EQUIPMENT:
Land, buildings and improvements..................................... 117,728 118,457
Machinery and equipment.............................................. 345,342 343,419
----------- -----------
Total cost....................................................... 463,070 461,876
Less Accumulated Depreciation....................................... 296,086 287,728accumulated depreciation........................................ 302,657 300,765
----------- ---------------------
Property, plant and equipment - net............................. 159,855 165,943
GOODWILLnet.............................. 160,413 161,111
OTHER ASSETS:
Goodwill - net(net of accumulated amortization.............................amortization
September and June - $15,136) ..................................... 75,212 72,212
INTANGIBLE ASSETS - net of accumulated amortization.................... 442 465
OTHER ASSETS........................................................... 12,900 13,98575,212
Other intangible assets.............................................. 428 435
Other noncurrent assets.............................................. 17,012 16,573
----------- ----------
TOTAL ASSETS...........................................................-----------
TOTAL............................................................ $ 661,444697,639 $ 618,705667,716
=========== =====================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable ....................................................................................................... $ 42,73047,439 $ 43,25841,983
Accrued liabilities ................................................ 43,885 45,674
Accrued income and other taxes...................................... 4,223 372liabilities.................................................. 54,178 42,940
----------- ---------------------
Total current liabilities....................................... 90,838 89,304liabilities........................................ 101,617 84,923
OTHER NONCURRENT LIABILITIES........................................... 17,513 15,890LIABILITIES............................................ 28,657 27,811
DEFERRED INCOME TAXES.................................................. 10,932 12,234TAXES................................................... 7,558 7,317
SHAREHOLDERS' EQUITY:
Preferred stock - authorized 3,050,000 shares issuable in series;
Class A - $1.00 par value, authorized 750,000 shares; Class B and
C - no par value, authorized 1,150,000 shares each;
outstanding - none
Common stock - authorized 75,000,000 shares; issued March 31,outstanding -
September 30, 2003 - no par value - 47,580,75535,757,347 shares;
June 30, 20022003 - no par value - 47,484,253 shares.................. 65,009 61,91935,770,663 shares.................................. 66,329 65,864
Retained earnings................................................... 822,120 752,534earnings.................................................... 849,478 836,928
Accumulated other comprehensive loss................................ (2,735) (2,752)loss................................. (8,968) (9,151)
----------- -----------
Total........................................................... 884,394 811,701Total............................................................ 906,839 893,641
Common stock in treasury, at cost March 31, 2003 -
11,737,014 shares; June 30, 2002 - 10,886,014 shares.............. (342,233) (310,424)cost.................................... (347,032) (345,976)
----------- -----------
Total shareholders' equity...................................... 542,161 501,277equity........................................... 559,807 547,665
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.............................TOTAL............................................................ $ 661,444697,639 $ 618,705667,716
=========== ===========
See Notesaccompanying notes to Condensed Consolidated Financial Statementsconsolidated financial statements.
3
LANCASTER COLONY CORPORATION AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
THREE MONTHS ENDED
NINE MONTHS ENDED
(DOLLARSSEPTEMBER 30
(AMOUNTS IN THOUSANDS, MARCH 31 MARCH 31 EXCEPT PER SHARE AMOUNTS)DATA) 2003 2002
2003 2002
------------------------ ---------- ---------- ---------- ----------------------------------------------------- ----------- -----------
NET SALES........................................SALES............................................................... $ 259,535266,652 $ 270,912 $ 843,025 $ 847,714275,821
COST OF SALES.................................... 205,962 213,388 657,534 660,520
---------- ---------- ---------- ----------SALES........................................................... 210,845 218,135
----------- -----------
GROSS MARGIN..................................... 53,573 57,524 185,491 187,194MARGIN............................................................ 55,807 57,686
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES....................... 24,629 26,030 75,751 94,053
RESTRUCTURINGEXPENSES............................ 24,169 24,886
----------- -----------
OPERATING INCOME........................................................ 31,638 32,800
INTEREST INCOME AND IMPAIRMENT CHARGE.............. (84) 4,861
---------- ---------- ---------- ----------
OPERATING INCOME................................. 29,028 31,494 104,879 93,141
OTHER INCOME (EXPENSE):
Interest Expense.............................. (54)
Other Income - Continued Dumping
and Subsidy Offset Act...................... 15,588 39,177 15,588
Interest Income and Other - Net............... (47) (205) 1,230 (327)
---------- ---------- ---------- ----------NET......................................... 346 397
----------- -----------
INCOME BEFORE INCOME TAXES....................... 28,981 46,877 145,286 108,348TAXES.............................................. 31,984 33,197
TAXES BASED ON INCOME............................ 10,934 18,070 54,704 41,777
---------- ---------- ---------- ----------INCOME................................................... 12,284 12,641
----------- -----------
NET INCOME.......................................INCOME.............................................................. $ 18,04719,700 $ 28,807 $ 90,582 $ 66,571
========== ========== ========== ==========20,556
=========== ===========
NET INCOME PER COMMON SHARE:
Basic and Diluted.............................Diluted.................................................... $ .50.55 $ .78 $ 2.49 $ 1.80.56
CASH DIVIDENDS PER COMMON SHARE..................SHARE......................................... $ .20 $ .18 $ .58 $ .53
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic......................................... 36,013,000 36,712,000 36,310,000 36,924,000
Diluted....................................... 36,064,000 36,777,000 36,366,000 36,980,000Basic................................................................ 35,763 36,562
Diluted.............................................................. 35,831 36,629
See Notesaccompanying notes to Condensed Consolidated Financial Statementsconsolidated financial statements.
4
LANCASTER COLONY CORPORATION AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
NINETHREE MONTHS ENDED
MARCH 31
(DOLLARSSEPTEMBER 30
(AMOUNTS IN THOUSANDS) 2003 2002
-------------------- --------- ---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income...............................................................income............................................................. $ 90,58219,700 $ 66,57120,556
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization.......................................... 24,056 26,352amortization........................................ 7,432 8,143
Provision for losses on accounts receivable............................ 617 16,418receivable.......................... 201 195
Deferred income taxes and other noncash charges........................ 1,761 (6,039)charges...................... 1,087 1,085
Restructuring and impairment charge.................................... 3,912
Losscharge.................................. (48) -
Gain on sale of property............................................... 68 129property............................................. (744) (4)
Changes in operating assets and liabilities:
Receivables.......................................................... 7,213 (24,235)
Inventories.......................................................... (4,885) 29,881
Prepaid expenses and otherReceivables........................................................ (17,130) (269)
Inventories........................................................ (8,249) (14,668)
Other current assets............................ (1,901) (1,330)assets............................................... (2,175) (2,090)
Accounts payable..................................................... (528) 1,490payable................................................... 5,456 4,622
Accrued liabilities and accrued income and other taxes............... 2,111 3,882
---------liabilities................................................ 11,504 6,664
---------- ----------
Net cash provided by operating activities.............................. 123,006 113,119
---------activities........................ 17,034 24,234
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments on property additions........................................... (21,673) (14,305)
Cash paid for acquisitions............................................... (3,000)additions......................................... (6,677) (6,469)
Proceeds from sale of property........................................... 1,440 80property......................................... 1,128 5
Other - net.............................................................. (1,756) (1,552)
---------net............................................................ (923) (361)
---------- ----------
Net cash used in investing activities.................................. (24,989) (15,777)
---------activities............................ (6,472) (6,825)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of dividends................................................... (7,150) (6,582)
Purchase of treasury stock............................................... (31,809) (25,128)
Payment of dividends..................................................... (20,996) (19,535)
Net change in short-term bank loans...................................... (4,500)
Payments on long-term debt............................................... (3,040)stock............................................. (1,056) (6,811)
Common stock issued upon exercise of stock options....................... 2,750 4,118
---------options..................... 420 2,155
---------- ----------
Net cash used in financing activities.................................. (50,055) (48,085)
---------activities............................ (7,786) (11,238)
---------- ----------
Effect of exchange rate changes on cash..................................... 17
---------cash................................... 10 7
---------- ----------
Net change in cash and equivalents.......................................... 47,979 49,257equivalents........................................ 2,786 6,178
Cash and equivalents at beginning of year...................................year................................. 142,847 83,378
4,873
------------------- ----------
Cash and equivalents at end of period.......................................period..................................... $ 131,357145,633 $ 54,130
=========89,556
========== ==========
SUPPLEMENTAL DISCLOSURE OF OPERATING CASH FLOWS:
Cash paid during the period for:
Interest...............................................................for income taxes.......................... $ 1,254 $ 111
========= ==========
Income taxes........................................................... $ 51,887 $ 44,179
========= ==========1,451
=========== ===========
See Notesaccompanying notes to Condensed Consolidated Financial Statementsconsolidated financial statements.
5
LANCASTER COLONY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(TABULAR DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NOTE 1 - BASIS OF PRESENTATION
The interim condensed consolidated financial statements are unaudited but, in theour
opinion, of management, reflect all adjustments necessary for a fair presentation of the
results of operations and financial conditionposition for such periods. All such
adjustments reflected in the interim condensed consolidated financial statements are
considered to be of a normal recurring nature. The results of operations for any
interim period are not necessarily indicative of results for the full year.
Accordingly, these financial statements should be read in conjunction with the
financial statements and notes thereto contained in the Company'sour Annual Report on Form
10-K for the year ended June 30, 2002.2003.
During fiscalthe three months ended September 30, 2003, certain inventory
quantity reductions resulted in a liquidation of LIFO inventory layers carried
at lower costs which prevailed in prior years. The effect of the liquidation for
the three and nine months ended March 31,September 30, 2003 was an increase in net earnings of
approximately $1.5 million and
$3.2$1.0 million after taxes, or approximately four and ninethree cents per share,
respectively.
The Company accountsshare.
We account for itsour stock option plan under Accounting Principles Board (APB)
Opinion No. 25, "Accounting for Stock Issued to Employees," and related
Interpretations. Accordingly, no compensation cost is reflected in net income,
as all options granted under those plans had an exercise price at least equal to
the market value of the underlying common stock on the date of grant. The
following table illustrates the effect on net income and net income per common
share as if the Companywe had applied the fair-value-based method under Statement of
Financial Accounting Standards (SFAS)("SFAS") No. 123, "Accounting for Stock-Based
Compensation," as amended by SFAS No. 148, to record expense for stock option
compensation:
THREE MONTHS ENDED
NINE MONTHS ENDED
MARCH 31 MARCH 31SEPTEMBER 30
2003 2002
2003 2002
--------- --------- -------- ------------------- ----------
Net income as reported......................reported.............................................. $ 18,04719,700 $ 28,807 $ 90,582 $ 66,57120,556
Less: Total stock-based employee compensation
expense determined under fair-value-based method
for all awards, net of related tax effects.......... (1,068)effects.......................... (102) (35)
(1,139) (106)
--------- --------- -------- ------------------- ----------
Pro forma net income........................income................................................ $ 16,97919,598 $ 28,772 $ 89,443 $ 66,465
========= ========= ======== =========20,521
========== ==========
Net income per common share Basic
As reported.............................- basic and diluted
as reported and pro forma........................................... $ .50.55 $ .78 $ 2.49 $ 1.80
Pro forma............................... $ .47 $ .78 $ 2.46 $ 1.80
Assuming full dilution
As reported............................. $ .50 $ .78 $ 2.49 $ 1.80
Pro forma............................... $ .47 $ .78 $ 2.46 $ 1.80.56
Certain prior year amounts have been reclassified to conform with the
current year presentation.
NOTE 2 - BUSINESS SEGMENTSSEGMENT INFORMATION
Comparative third quarterThe following summary financial information by business segment is
consistent with the basis of segmentation and year-to-date unaudited results bymeasurement of segment are
as follows:profit or
loss presented in our June 30, 2003 consolidated financial statements:
THREE MONTHS ENDED
NINE MONTHS ENDED
MARCH 31 MARCH 31SEPTEMBER 30
2003 2002 2003 2002
--------- ----------
---------- ----------
NET SALES
Specialty Foods..................Foods............................................. $ 140,959154,817 $ 143,425 $ 452,908 $ 428,973147,633
Glassware and Candles............ 57,274 67,988 207,237 250,571
Automotive....................... 61,302 59,499 182,880 168,170
---------Candles....................................... 56,126 68,210
Automotive.................................................. 55,709 59,978
---------- ----------
----------
Total.........................Total..................................................... $ 259,535266,652 $ 270,912 $ 843,025 $ 847,714
========= ==========275,821
========== ==========
OPERATING INCOME
Specialty Foods..................Foods............................................. $ 23,34226,313 $ 25,910 $ 83,914 $ 82,81626,276
Glassware and Candles............ 2,279 2,291 12,252 5,000
Automotive....................... 4,937 4,720 13,381 9,725Candles....................................... 3,106 4,077
Automotive.................................................. 3,651 3,903
Corporate expenses............... (1,530) (1,427) (4,668) (4,400)
---------Expenses.......................................... (1,432) (1,456)
---------- ----------
----------
Total.........................Total..................................................... $ 29,02831,638 $ 31,494 $ 104,879 $ 93,141
========= ==========32,800
========== ==========
6
LANCASTER COLONY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NOTE 3 - GOODWILL AND PURCHASED INTANGIBLE ASSETS
Effective July 1, 2002,IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In May 2003, the Company adoptedFinancial Accounting Standards Board issued SFAS No.
150, "Accounting for Certain Financial Instruments with Characteristics of Both
Liabilities and Equity." SFAS No. 150 provides guidance on the provisionsappropriate
classification for and accounting of financial instruments with characteristics
of both liabilities and equity. It requires that financial instruments be
classified as a liability (or an asset in certain circumstances) if they are
within the scope of the Statement. The Statement is effective for financial
instruments entered into or modified after May 31, 2003 and otherwise is
effective at the beginning of the first interim period beginning after June 15,
2003. The adoption of SFAS No. 142,
"Goodwill150 did not have a material impact on our results
of operations or our financial condition.
NOTE 4 - GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill attributable to the Specialty Foods and Other Intangible Assets." SFAS No. 142 specifies that, among other
things, goodwillAutomotive segments was
$74.2 million and intangible assets with an indefinite useful life will no
longer be amortized. Thus, in accordance with SFAS No. 142, goodwill is no
longer being amortized. Intangible assets with lives restricted by contractual,
legal or other means will continue to be amortized over their useful lives. SFAS
No. 142 also requires goodwill to be tested for impairment on$1.0 million, respectively, at least an annual
basisboth September and written down to fair value if considered impaired. Accordingly,
management has completed its initial asset impairment assessment and such
analysis indicated that there is no impairment.June 30,
2003.
The following table summarizes the Company'sour segment identifiable other intangible
assets as of March 31, 2003September and June 30, 2002:2003:
MARCH 31,SEPTEMBER JUNE
2003 JUNE 30, 2002
----------------------- ------------------------
GROSS GROSS
INTANGIBLE ASSETS CARRYING ACCUMULATED CARRYING ACCUMULATED
SUBJECT TO AMORTIZATION AMOUNT AMORTIZATION AMOUNT AMORTIZATION
-----------------------2003
---------- --------
------------ -------- ------------Specialty Foods - Trademarks
Specialty Foods - Trademarks...................Gross carrying value................................................... $ 370 $ 110370
Accumulated amortization............................................... (114) (112)
------ -------
Net Carrying Value..................................................... $ 370256 $ 103258
====== =======
Glassware &and Candles - Customer Lists...........Lists
Gross carrying value................................................... $ 250 68$ 250
52Accumulated amortization............................................... (78) (73)
------ ------ ----- -----
Total........................................-------
Net Carrying Value..................................................... $ 620172 $ 178177
====== =======
Total Net Carrying Value................................................. $ 620428 $ 155435
====== ====== ===== ============
Amortization expense relating to these assets was approximately $23,000 and
$30,000$7,000
for the nine monthsquarters ended March 31,September 30, 2003 and the year ended June 30,
2002, respectively.2002. The amortization expense is
estimated to be approximately $30,000 for each of the five fiscal years to endending
June 30, 2003, 2004 2005, 2006
and 2007.
Goodwill attributable to the Specialty Foods and Automotive segments is
$74.2 million and $1.0 million, respectively, as of March 31, 2003. The $74.2
million includes the current year contingent payment of $3.0 million as further
discussed in Note 6.
The following is a reconciliation assuming goodwill and other intangible
assets had been accounted for in accordance with the provisions of SFAS No. 142
in the three and nine months ended March 31, 2002:
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31 MARCH 31
2003 2002 2003 2002
-------- ------- ------- --------
Reported Net Income.............................. $ 18,047 $28,807 $90,582 $66,571
Add back amortization of goodwill, net of taxes.. 640 1,896
-------- ------- ------- -------
Adjusted Net Income.............................. $ 18,047 $29,447 $90,582 $68,467
======== ======= ======= =======
Reported Basic and Diluted Earnings Per Share.... $.50 $.78 $2.49 $1.80
Adjusted Basic and Diluted Earnings Per Share.... $.50 $.80 $2.49 $1.85
through 2008.
NOTE 45 - RESTRUCTURING AND IMPAIRMENT CHARGE
On November 1, 2002, the Companywe announced the restructuring and consolidation of
itsour glass manufacturing facility located in Dunkirk, Indiana into that of the Company'sour facility
located in Sapulpa, Oklahoma. The Sapulpa plant has gained pressed glassware
manufacturing in addition to its blown glassware capabilities, while warehousing
and certain other ancillary functions continue to be performed at the Dunkirk
facility. This action was deemed necessary due to a combination of weaker demand
for pressed glassware, import competition and the existence of excess plant
capacity and is expected to
improve capacity utilization over time.capacity.
As a result of this plan, during the second quarter of the year ended
December 31,
2002, the CompanyJune 30, 2003, we recognized a pretax charge of approximately $4.9 million,
consisting of employee separation costs (relating to approximately 250 hourly
and salary employees), pension curtailment costs, closure and cleanup costs and
the write-down of property, plant and equipment having no future utility as a
result of the restructuring decision. The write-down was reduced approximately
$84,000 during the quarter ended March 31, 2003 based on a final review of the
related property involved. The accounting for this restructuring iswas
in accordance with Emerging Issues Task Force No. 94-3. In accordance with this
guidance, the restructuring 7
provision was determined based on estimates prepared
at
7
LANCASTER COLONY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(TABULAR DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
---------------------------------------------------------
the time we approved the restructuring actions were approved by management.actions. An analysis of the Company'sour restructuring
activity and related liability is as follows:
EMPLOYEE
SEPARATION ASSET OTHER
COSTS WRITE-OFFS CHARGES TOTAL
---------- ------------------- ------- -----
Restructuring Provision
Employee separation costs................... $ 1,040 $ - $ - $ 1,040
Property and equipment impairment........... 2,943 2,943
Pension curtailment......................... 678 678
Closing and cleanup costs................... 200 200
-------- ------- ------- --------
Total..................................... 1,040 2,943 878 4,861
Cash Paid..................................... 893 56 949
Non-Cash Charges.............................. 2,943 678 3,621
-------- ------- ------- --------
Accrual Balance at March 31,June 30, 2003................................ $ 89 $ 114 $ 203
Cash Paid....................................................... (43) (5) (48)
----- ------ ------
Accrual Balance at September 30, 2003
(included in accrued liabilities).......................................... $ 14746 $ -109 $ 144 $ 291
======== ========== ======= ========155
===== ====== ======
It is anticipatedWe anticipate that the remaining cash-related charges will be paid by
the end of the currentthird quarter of fiscal year.2004. Although pressed glassware
manufacturing commenced during the third quarter of fiscal 2003 at the Sapulpa
facility, it is anticipated
that the Company will incur some amount ofwe incurred transitional costs over the balance of the fiscal year.year 2003.
Accordingly, it does not appear that the benefits of this restructuring will not become fully evident
until the current fiscal year beginning July 1,
2003.
NOTE 5 - RECENTLY ISSUED ACCOUNTING STANDARDS
In November 2002, the Financial Accounting Standards Board ("FASB") issued
FASB Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements
for Guarantees, Including Indirect Guarantees of Indebtedness of Others" ("FIN
45"). FIN 45 requires a guarantor to recognize a liability, at the inception of
the guarantee, for the fair value of obligations it has undertaken in issuing
the guarantee and also include more detailed disclosures with respect to
guarantees. FIN 45 is effective for guarantees issued or modified starting
January 1, 2003 and requires the additional disclosures beginning with the
Company's fiscal second quarter ended December 31, 2002. The provisions of FIN
45 have been adopted with no material impact on the Company's results of
operations or financial condition. Additional disclosure has been provided with
respect to guarantees in Note 6.
In November 2002, the Emerging Issues Task Force reached a consensus on
Issue No. 00-21, "Revenue Arrangements with Multiple Deliverables" ("EITF
00-21"). EITF 00-21 provides guidance on how to determine whether an arrangement
involving multiple deliverables contains more than one unit of accounting. EITF
00-21 will be effective for arrangements entered into after June 30, 2003. The
adoption of EITF No. 00-21 is not expected to have a material impact on the
Company's results of operation or financial condition.
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure." SFAS No. 148 provides alternative
methods of transition for a voluntary change to the fair-value-based method of
accounting for stock-based employee compensation and amends the disclosure
requirements of SFAS No. 123. The transition provisions of this Statement are
effective for fiscal years ending after December 15, 2002, and the disclosure
requirements of the Statement are effective for interim periods beginning after
December 15, 2002. The Company accounts for stock-based employee compensation
arrangements in accordance with the provisions of APB No. 25 and complies with
the disclosure provisions of SFAS No. 123 and SFAS No. 148.
In January 2003, the FASB issued FASB Interpretation No. 46, "Consolidation
of Variable Interest Entities" ("FIN 46"), to expand upon and strengthen
existing accounting guidance that addresses when a company should include in its
financial statements the assets, liabilities and activities of another entity.
Until now, one company generally has included another entity in its consolidated
financial statements only if it controlled the entity through voting interests.
FIN 46 changes that by requiring a variable interest entity, as defined, to be
consolidated by a company if that company is subject to a majority of the risk
of loss from the variable interest entity's activities or entitled to receive a
majority of the entity's residual returns or both. FIN
8
46 also requires disclosures about variable interest entities that the company
is not required to consolidate but in which it has a significant variable
interest. The consolidation requirements of FIN 46 apply immediately to variable
interest entities created after January 31, 2003 and to older entities in the
first fiscal year or interim period beginning after June 15, 2003. Certain of
the disclosure requirements, none of which appear to apply to the Company at
this time, are effective in all financial statements issued after January 31,
2003, regardless of when the variable interest entity was established. The
provisions of FIN 46 have been adopted and based upon a review of such
provisions it has been determined that there are no variable interest entities
which would require consolidation or disclosure at this time.year.
NOTE 6 - COMMITMENTS AND CONTINGENCIES
At March 31,September 30, 2003, the Company iswe are a party to various claims and litigation
which have arisen in the ordinary course of business. Such matters did not have
a material effect on the current fiscal year-to-date results of operations and,
in theour opinion, of management, their ultimate disposition will not have a material adverse
effect on the Company'sour consolidated financial statements.
During the second quarter of fiscal 2003, the Company recognized as income
approximately $39.2 million being distributed by the U.S. Customs Service to the
Company consistent with the terms of the Continued Dumping and Subsidy Offset
Act of 2000 ("CDSOA"). In fiscal 2002, approximately $15.6 million received
under this Act was recognized in the fiscal third quarter. These amounts are
recorded as other income in the accompanying financial statements. The CDSOA,
which applies to the Company's candle operations, is in its second year of
effectiveness and is intended to redress unfair dumping of imported products
through cash payments to eligible affected companies. Payments to be received in
future years under CDSOA are subject to many variables outside the control of
the Company and, accordingly, the related amounts, if any, are not subject to
reasonable estimation at the present time. The Company is aware that another
candle manufacturer initiated legal proceedings against the Customs Service and
claimed a right to share in the total proceeds payable to candle manufacturers
pursuant to the provisions of CDSOA. This matter was decided by the trial court
in favor of the Customs Service in April 2003. The trial court ruling has since
been appealed by the plaintiff to the applicable Federal Appeals Court. If this
litigation is eventually resolved in favor of the claimant, it might become
asserted that the payments that have been received by the Company should be
reduced by an undetermined amount through either smaller future distributions or
refunds to the Customs Service.
Certain of the Company'sour automotive accessory products carry explicit limited
warranties that extend from twelve months to the life of the product, based on
terms that are generally accepted in the marketplace. The Company'sOur policy is to record a
provision for the expected cost of the warranty-related claims at the time of
the sale, and periodically adjust the provision to reflect actual experience.
The amount of warranty liability accrued reflects management'sour best estimate of the
expected future cost of honoring Companyour obligations under the warranty plans. The
warranty accrual as of March 31,September 30, 2003 and June 30, 20022003 is immaterial to theour
financial condition, of the Company, and the change in the accrual for the current quarter and the first nine months of
fiscal 20032004 is immaterial to the Company'sour results of operations and cash flows.
During the quarters ended December 31, 2002 and 2001, the Company accrued
$3.0 million and $2.3 million, respectively, in conjunction with estimated
contingent payments associated with the September 2000 acquisition of Sister
Schubert's Homemade Rolls, Inc. The December 31, 2002 accrual of $3.0 million
was paid during the quarter ended March 31, 2003. The December 31, 2001 accrual
of $2.3 million was paid in the quarter ended June 30, 2002; thus, this activity
was excluded from the Statements of Cash Flows for the period ending March 31,
2002. This contingent payment arrangement continues through calendar 2003 with a
maximum payment of $3.0 million and is based largely on the future annual level
of Sister Schubert's earnings, as defined.
NOTE 7 - COMPREHENSIVE INCOME
Total comprehensive income for the quarters ended March 31,September 30, 2003 and
2002 was approximately $18.1$19.9 million and $28.8$20.6 million, respectively. TotalThe
September 30, 2003 comprehensive income year-to-date asconsists of March 31, 2003net income, the tax benefit
on Employee Stock Ownership Plan dividends and foreign currency translation
adjustments. The September 30, 2002 was
approximately $90.6 million and $66.6 million, respectively. Total comprehensive income for these respective periods includesconsists of net income
and foreign currency translation adjustments.
98
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
LANCASTER COLONY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
(TABULAR DOLLARS IN THOUSANDS)
RESULTS OF OPERATIONS
THREE MONTHS ENDED
NINE MONTHS ENDED
MARCH 31 MARCH 31
2003 2002SEPTEMBER 30
2003 2002
---------- ----------
---------- ----------NET SALES
NET SALES
Specialty Foods.....................Foods................................................... $ 140,959154,817 $ 143,425 $ 452,908 $ 428,973147,633
Glassware and Candles............... 57,274 67,988 207,237 250,571
Automotive.......................... 61,302 59,499 182,880 168,170Candles............................................. 56,126 68,210
Automotive........................................................ 55,709 59,978
---------- ----------
---------- ----------
Total.............................Total........................................................... $ 259,535266,652 $ 270,912 $ 843,025 $ 847,714
========== ==========275,821
========== ==========
As reflected above, consolidated net sales of $259.5 million for the three months ended
September 30, 2003 were $266,652,000, which is a 3% decrease from the prior year
record total of $275,821,000. Growth in the Specialty Foods segment was more
than offset by declines in the Glassware and Candles segment and Automotive
segment. Net sales of the Specialty Foods segment totaled $154,817,000, a 5%
increase over the comparable first quarter fiscal third quarter ended March 31, 2003 decreased approximately 4%total of $147,633,000.
This segment's increased sales were derived from internally-generated growth,
primarily through greater retail sales of frozen breads, dips and dressings.
Foodservice sales also grew due to increased volumes with larger national
restaurant accounts.
Sales of the Glassware and Candles segment totaled $56,126,000, an 18%
decline from the comparable prior year total of $270.9 million. For the nine-month period ended
March 31, 2003, net$68,210,000. This decline was
primarily attributable to lower sales of candles and accessories due to softer
consumer demand and ongoing competitive pressures. Automotive segment sales
totaled $843.0 million, or less than 1% below$55,709,000, a 7% decrease from the prior yearyear's first quarter total of
$847.7 million. Of some affect across all three segments$59,978,000. The loss of a larger program with an aluminum accessory original
equipment manufacturer ("OEM") was offset, for the most part, by increased sales
in other OEM programs and the aftermarket. The reduction of production schedules
by certain OEM customers also affected sales volumes.
As a percentage of sales, our consolidated gross margins for the three
months ended March 31,September 30, 2003 totaled 20.9%, the same level that was achieved
during the presencecomparable period of unsettled economic
conditions, in part resulting from uncertainties associated with the conflict in
Iraq.
Net sales of2002. Margins within the Specialty Foods segment
for the three-month period ended
March 31, 2003 declined by almost 2% while net sales between the comparable
nine-month periods increased by over 5%.mainly due to increases in ingredient costs, including soybean oil,
eggs and certain dairy products. The most recent quarter's sales were
influenced by a more competitive retail environment and by the 2003 Easter
holiday occurring in April, as opposed to March in 2002. Additionally, fiscal
2003 third quarter sales of foodservice products were adversely affected by
harsher winter weather dampening the volume of national chain restaurant
customers. Factors contributing to increased sales for the nine-month period
included growth in retail sales of frozen breads and rolls along with greater
volumes of dressings and sauces sold to national chain restaurant accounts.
Trade promotional costs, which are netted against gross sales, have declined
during both comparative periods of fiscal 2003 as affected by changes in
customer mix, improved oversight and, in the third quarter, lower sales.
Net salesimpact of the Glassware and Candles segment declined approximately 16%
and 17% for the respective three- and nine-month periods. Lackluster consumer
demand, competitive market and pricing conditions, and a softer candle category
led to lower three-month sales for the segment. However, the fiscal 2003
three-month period benefited from the initial stocking shipments of a new line
of branded candle products. This impact was mitigated by the extent of the
related placement costs, which were recorded as a reduction to net sales in the
period. The nine-month decline, which was primarily due to lower candle sales,
was also affected by the loss of a mass-market candle customer that occurred as
of the beginning of calendar 2002.
Automotive segment sales increased 3% for the third quarter and almost 9%
for the nine-month period. Increased volume with OEM accounts, especially of
aluminum light truck accessories, more than offset weaker aftermarket volumes
for floor mats.
The Company's consolidated gross margins as a percentage of net sales of
20.6% and 22.0% declined slightly for both the respective three- and nine-month
periods ended March 31, 2003 relative to the 21.2% and 22.1% achieved for the
comparable periods of fiscal 2002. Third quarter gross margins in the Specialty
Foods segment were adversely affected by a less favorable sales mix and material
costs that rose markedly above levels of a year ago, primarily due to higher
costs for soybean oil. The effect of increased material costs on comparative
third quarter results is estimated to have exceeded $2 million. These factors
also contributed to lower segment gross margins for the nine-month period. It is
anticipated that increased levels of soybean oil costs
willalone was in excess of $1.5 million for this first quarter. Soybean oil costs
are expected to persist at higher year-over-year levels through at least the fourth quarter of fiscal 2003. Gross margins of the Automotive segment
during the third quarter were relatively constant as the effects of certain
rising material costs and ongoing pricing pressures were mitigated by a better
sales mix and the implementation of manufacturing cost reduction initiatives.
Nine-month segment gross margins remained ahead of year ago margins.
10
early
calendar 2004. Gross margins of the Glassware and Candles segment forincreased due
to the fiscal 2003
periods reflected improvement over the prior year levels as benefiting fromrecognition of pre-tax income of approximately $1.6 million related to
the liquidation of certain LIFO glassware inventoryinventories carried at substantially lower prior years'
costs. Such liquidation reducedThis segment cost of sales by
approximately $2.4 million and $5.1 million for the respective three- and
nine-month periods of fiscal 2003. Similarly derived income of $0.4 million was
recognized for the comparative periods of fiscal 2002. Margins in the current
year periods also benefited from the overhead eliminated by the closure of the
Dunkirk, Indiana manufacturing operations as further discussed below. Otherwise,
margins were adversely impacted by aexperienced competitive pricing environmentconditions and less fixed
cost absorption on lower candle sales. Segment operating resultsmanufacturing levels. Gross margins of the Automotive
segment achieved slight improvement and were also
impacted in the current year periodsinfluenced by a provision$0.4 million gain
on the sale of approximately $1.4
million related to the impairment of certain glass-forming molds based on a
decision to exit several consumer product lines. Prior year margins inan idle manufacturing facility. However, this segment were adversely affected by costs associatedalso
generally experienced somewhat higher material costs.
Consistent with a labor strike which
occurred at the Dunkirk facility.
Consolidateddecrease in net sales, consolidated selling, general
and administrative costs of $24.6 million and
$75.8 million$24,169,000 for the three months ended September 30,
2003 decreased approximately 5% and 19%, respectively,3% from the corresponding fiscal 2002 three- and nine-month totals$24,886,000 incurred for the three months ended
September 30, 2002. As a percentage of $26.0 million and
$94.1 million. Contributingsales, such costs were 9.1%, essentially
flat as compared to the decline in the most recent quarter were
volume-driven decreases in selling costsprior year percentage of the Specialty Foods and Glassware
and Candles segments. The fiscal 2002 nine-month total included a second quarter
provision for bad debts within the Glassware and Candles segment of
approximately $14.3 million related to the Company's accounts receivable
exposure to Kmart Corporation, which filed for reorganization under Chapter 11
of the U.S. Bankruptcy Code in January 2002.
During the quarter ended December 31, 2002, a restructuring and asset
impairment charge totaling $4.9 million before taxes was provided in the
Glassware and Candles segment. The accounting for this restructuring has been in
accordance with Emerging Issues Task Force No. 94-3. The majority of this
charge, approximately $2.9 million, was associated with the write-down of
property, plant and equipment no longer expected to be used as a result of the
restructuring. This write-down was reduced approximately $84,000 during the
quarter ended March 31, 2003 based on a final review of the related property
involved. The restructuring and asset impairment charge related to the November
2002 announcement that the Company's glass manufacturing facility located in
Dunkirk, Indiana would be consolidated over a period of several months into that
of the Company's facility located in Sapulpa, Oklahoma. This action is expected
to improve capacity utilization over time. Additionally, the Sapulpa facility
has gained the capability to manufacture pressed glassware. The number of jobs
adversely affected at the Dunkirk facility approximated 250. Warehousing and
certain other ancillary functions are continuing to be performed at Dunkirk.
Although pressed glassware manufacturing commenced during the third quarter at
the Sapulpa facility, it is anticipated that the Company will incur some amount
of transitional costs over the balance of the fiscal year. Accordingly, it is
anticipated that the benefits of this restructuring will not become fully
evident until the fiscal year beginning July 1, 2003.9.0%.
9
The foregoing factors contributed to consolidated operating income
totaling $29.0 million and $104.9 million$31,638,000 for the three- and nine-month periodsthree months ended March 31,September 30, 2003, compared toa decrease
of 4% from the corresponding fiscal 2002 totals2003 total of $31.5 million
and $93.1 million.$32,800,000. By segment, the Company'sour
operating income can be summarized as follows:
THREE MONTHS ENDED
NINE MONTHS ENDED
MARCH 31 MARCH 31
2003 2002SEPTEMBER 30
2003 2002
---------- ----------
---------- ----------OPERATING INCOME
OPERATING INCOME
Specialty Foods.........................Foods................................................... $ 23,34226,313 $ 25,910 $ 83,914 $ 82,81626,276
Glassware and Candles................... 2,279 2,291 12,252 5,000
Automotive.............................. 4,937 4,720 13,381 9,725Candles............................................. 3,106 4,077
Automotive........................................................ 3,651 3,903
Corporate expenses...................... (1,530) (1,427) (4,668) (4,400)Expenses................................................ (1,432) (1,456)
---------- ----------
---------- ----------
Total.................................Total........................................................... $ 29,02831,638 $ 31,494 $ 104,879 $ 93,141
========== ==========32,800
========== ==========
During the second quarter of fiscal 2003, the Company recognized as income
approximately $39.2 million being distributed by the U.S. Customs Service to the
Company consistentConsistent with the terms of the Continued Dumping and Subsidy Offset
Act of 2000 ("CDSOA"). In fiscal 2002, approximately $15.6 million received
under this Act was recognized in the fiscal third quarter. These amounts are
recorded as other income in the accompanying financial statements. The CDSOA,
which applies to the Company's candle operations, is in its second year of
effectiveness and is intended to redress unfair dumping of imported products
through cash payments to eligible affected companies. Payments to be received in
future years under CDSOA are subject to many variables outside the control of
the Company and, accordingly, the related amounts, if any, are not subject to
reasonable estimation at the present time. The Company is aware that
11
another candle manufacturer initiated legal proceedings against the Customs
Service and claimed a right to share in the total proceeds payable to candle
manufacturers pursuant to the provisions of CDSOA. This matter was decided by
the trial court in favor of the Customs Service in April 2003. The trial court
ruling has since been appealed by the plaintiff to the applicable Federal
Appeals Court. If this litigation is eventually resolved in favor of the
claimant, it might become asserted that the payments that have been received by
the Company should be reduced by an undetermined amount through either smaller
future distributions or refunds to the Customs Service. Further affecting other
income during fiscal 2003 has been an increase in the level of interest income
as influenced by the Company's greater level of investable cash and equivalents,
although as somewhat offset by a year-over-year decline in interest rates. Also
recognized in otheroperating income, in the second quarter of fiscal 2002 was a gain of
approximately $1 million related to insurance proceeds associated with a
casualty loss that occurred in January 2001.
With the fiscal 2002 three-month results being inclusive of the prior
fiscal year's CDSOA remittance, and with the fiscal 2003 nine-month results
notably influenced by the increased CDSOA income applicable to the current
fiscal year, net income of
$18.0 million and $90.6 million$19,700,000 decreased 4% from the preceding year's net income for the three- and
nine-month periods ended March 31, 2003 decreased by 37% and increased by 36%
over the respective totalsquarter of
fiscal 2002. As was further affected by the
Company's share repurchases, fully diluted earnings$20,556,000. Earnings per share of $.50 and $2.49
for the three-fiscal 2004 quarter was influenced by
our share repurchase program and nine-month periods decreased 36%totaled $.55 per share on a basic and increased 38%,
respectively, asdiluted
basis compared to $.56 recorded in the corresponding totals of $.78 and $1.80 of a
year ago.prior year.
FINANCIAL CONDITION
NetFor the three months ended September 30, 2003, net cash provided by
operating activities for the nine months ended March
31, 2003 totaled $123.0 million,$17,034,000, which is $9.9 million greater than the $113.1
millioncompares to $24,234,000 provided in the nine months ended March 31, 2002. The increased level of
net income and the extent of relative year-over-year changes in various working
capital components influenced this fluctuation in cash flows.
Significant investment activities for the first nine months of fiscal 2003
included $21.7 million paid for property additions and the $3.0 million
contingent payment related to the fiscal 2001 Sister Schubert's Homemade Rolls,
Inc. acquisition. Financing activities for the nine months ended March 31, 2003
included $31.8 million expended for share repurchases and $21.0 million for
dividends paid. The level of total dividends paid in the current nine-month
period increased 7% over that paid
in the comparable prior year period. This decrease primarily results from
relative changes in working capital components, particularly receivables and
inventories, somewhat offset by accrued liabilities.
Total working capital at September 30, 2003 of $342,957,000 increased by
$13,495,000 over the $329,462,000 present this past June 30. In particular,
accounts receivable increased by $17,130,000 due to seasonal sales in
preparation for the holiday season. Also, inventories in the current year's
quarter increased $8,249,000 as influenced by the impactfirst quarter's candle sales
being at lower levels than expected. However, we have reduced scheduled
production in the second fiscal quarter to more appropriately adjust future
inventory levels. Offsetting these increases, accrued liabilities increased by
$11,504,000 since June 30 primarily as a result of a five cent, or 9%, per sharean increase in accruals for
Federal income taxes.
Significant investment activities conducted during the effective dividend rate was
partially offset bythree months
ended September 30, 2003 included $6,677,000 expended for payments on property
additions. Financing activities of note consisted of $1,056,000 expended for the
impactpurchase of treasury stock and $7,150,000 related to the Company's share repurchases onpayment of dividends.
Approximately 756,000 shares outstanding. Approximately 880,000 shares remainedremain authorized for future buyback at March 31,September
30, 2003. Management believesThe dividends paid during the current quarter increased approximately
9% due to the effects of an 11% increase in the stated dividend rate being
somewhat offset by the extent of share repurchases. We believe that cash and equivalents currently available, cash
provided from operations and the currently available bank credit arrangements
should be adequate to meet the Company'sour foreseeable cash requirements over the remainder
of fiscal 2004.
In fiscal 2003, we consolidated the glass manufacturing operations of
our Indiana Glass Company facility in Dunkirk, Indiana into that of the Indiana
Glass facility located in Sapulpa, Oklahoma. As a result of this action, we
recorded a restructuring charge of approximately $4.9 million ($3.0 million
after taxes) during the second quarter of fiscal 2003. The charge consisted of
employee separation costs, pension curtailment costs, closure and cleanup costs,
and the writedown of property, plant and equipment having no future utility as a
result of the restructuring decision. The plant consolidation, which affected
approximately
10
250 jobs, was substantially completed by June 2003. The following table reflects
cash payments made during the quarter ended September 30, 2003:
EMPLOYEE
SEPARATION OTHER
COSTS CHARGES TOTAL
---------- ------- -------
Accrual Balance at June 30, 2003................................ $ 89 $ 114 $ 203
Cash Paid....................................................... (43) (5) (48)
----- ------ ------
Accrual Balance at September 30, 2003
(included in accrued liabilities)............................. $ 46 $ 109 $ 155
===== ====== ======
There have been no significant changes in critical accounting policies from those
disclosed in the Company'sour Annual Report on Form 10-K for the year ended June 30, 2002.2003.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This Form 10-Q contains forward-looking statements related to future
growth and earnings opportunities. Such statements are based upon certain
assumptions and assessments made by management of the Company in light of its
experience and perception of historical trends, current conditions, expected
future developments and other factors it believes to be appropriate. Actual
results may differ as a result of factors over which the Company has no, or
limited, control including the strength of the economy, slower than anticipated
sales growth, the extent of operational efficiencies achieved, the success of
new product introductions, price and product competition, and increases in raw
materials costs. Management believes these forward-looking statements to be
reasonable; however, undue reliance should not be placed on such statements,
which are based on current expectations. The Company undertakes no obligation to
publicly update such forward-looking statements. More detailed statements
regarding significant events which could affect the Company's financial results
are included in the Company's Form 10-K filed with the Securities and Exchange
Commission.
12
ITEM 4. CONTROLS AND PROCEDURES
The Company'sEvaluation of Disclosure Controls and Procedures. As of the end of the
period covered by this Quarterly Report on Form 10-Q, our Chief Executive
Officer and Chief Financial Officer evaluated, with the participation of
management, the effectiveness of our disclosure controls and procedures (as
defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")). Based upon this evaluation, our Chief
Executive Officer and Chief Financial Officer have concluded based on their evaluation within 90 days prior to the filing date of
this report, that the Company'sour disclosure
controls and procedures (as defined
in Securities Exchange Act Rules 13a-14(c) and 15d-14(c)) arewere effective as of September 30, 2003 to ensure that
information required to be disclosed in the reports that the Company
fileswe file or submitssubmit under
the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange Commission's rules and forms.
ThereNo changes were no significant changesmade to our internal control over financial reporting
(as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Company'sExchange Act)
during our most recent fiscal quarter that have materially affected, or is
reasonably likely to materially affect, our internal controls or in
other factors that could significantly affect these controls subsequent to the
date of their evaluation, including any significant deficiencies or material
weaknesses of internal controls that would require corrective action.control over financial
reporting.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits -Exhibits. See Index to Exhibits following Certifications.Signatures.
(b) Reports on Form 8-K - There were no reports filed8-K. A report, dated August 21, 2003, on Form 8-K duringwas
filed with the SEC on August 21, 2003 pursuant to Items 7 and 12,
announcing the financial results for the three months and fiscal year
ended March 31,June 30, 2003.
11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LANCASTER COLONY CORPORATION (REGISTRANT)
Date: May 13,November 12, 2003 By: /s/JOHN B. GERLACH, JR.
-------------- ----------------------------------------------------------- ------------------------------------
John B. Gerlach, Jr.
Chairman, Chief Executive Officer
and President
and Director
Date: May 13,November 12, 2003 By: /s/JOHN L. BOYLAN
-------------- ----------------------------------------------------------- ------------------------------------
John L. Boylan
Treasurer, Vice President,
Assistant Secretary and
Chief Financial Officer
(Principal Financial
and Accounting Officer)
13
CERTIFICATION BY CHIEF EXECUTIVE OFFICER
I, John B. Gerlach, Jr., certify that:
1. I have reviewed this quarterly report on Form 10-Q of Lancaster Colony
Corporation;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of the registrant's board of directors (or persons
performing the equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: May 13, 2003 By: /s/JOHN B. GERLACH, JR.
-----------------------
John B. Gerlach, Jr.
Chief Executive Officer
14
CERTIFICATION BY CHIEF FINANCIAL OFFICER
I, John L. Boylan, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Lancaster Colony
Corporation;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of the registrant's board of directors (or persons
performing the equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: May 13, 2003 By: /s/JOHN L. BOYLAN
-----------------
John L. Boylan
Chief Financial Officer
1512
LANCASTER COLONY CORPORATION AND SUBSIDIARIES
FORM 10-Q
MARCH 31,SEPTEMBER 30, 2003
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION LOCATED AT
- ------------- ----------- ----------
99.131.1 Certification of CEO under Section 906302 of the Sarbanes-Oxley Act of 2002.......2002..... Filed herewith
99.231.2 Certification of CFO under Section 302 of the Sarbanes-Oxley Act of 2002..... Filed herewith
32. Certification of CEO and CFO under Section 906 of the Sarbanes-Oxley
Act of 2002.......2002.................................................................. Filed herewith
1613